Henry Wiens, Mary Wiens v. Minister of National Revenue, [1984] CTC 2821, 84 DTC 1646

Sarchuk, TCJ [ORALLY]:—The appeals of Henry and Mary Wiens in respect of taxation years 1976, 1977 and 1978 were heard on common evidence by consent of all parties.

Certain facts did not appear to be in dispute. It is accepted that on September 9, 1976, the two appellants contracted to sell a farm with the closing date to be February 15, 1977. The selling price was $507,416, and the proceeds of sale were $468,600. They received $25,000 in 1976 and the balance in 1977.

The farm consisted of approximately 976 acres, parts of which were owned jointly by the two appellants, parts were owned by Henry Wiens alone, and parts were owned by his wife alone. The parcel at issue, consisting of 465 acres, was owned jointly by the two appellants on Valuation Day, December 31, 1971. One parcel of 214 acres was acquired by the appellant, Mr Wiens, in 1972 at $90 an acre. One parcel of 147 acres was acquired by Mr Wiens in 1975 at $163 an acre, and one parcel of 150 acres was acquired by Mrs Wiens in 1972 at approximately $114 an acre.

The issue before me was whether the Minister had correctly reassessed on the basis that the fair market value of the 465-acre parcel on December 31, 1971, was $115 per acre, and not $160 per acre as the appellants contend.

Mr Wiens testified he has lived in the area all of his life and has been an implement dealer since 1950. In 1966 he branched out into farming, and would appear to have successfully carried on the two businesses since that time. In addition to having a good deal of farming experience, he dealt with farmers on a regular basis in his implement business, and was constantly involved in farm oriented discussions which, not surprisingly, would and did include discussions of land value.

In preparing the relevant tax returns, Mr Wiens stated that he arrived at the fair market value of $160 which was claimed, on the basis of discussions with his auditors, and their conclusion that it was a fair value in 1971. The basis of the decision was, in Mr Wiens* words, and I quote, “simply because I was sure there were people prepared to pay that price for that land”. No other reason for this evaluation was advanced. No expert appraisal was sought by the appellants at that time, nor was one obtained subsequently. Mr Wiens had been provided with a copy of the appraisal report prepared for the respondent, and in the course of his testimony he challenged the valuation contained therein on the basis that no adjustments had been made to the comparable sales to reflect the fact that almost every comparable was, in his view, the result of, or resulted from necessity or compulsion in one form or another.

It was later argued that these special circumstances were crucial and had not been taken into account by Mr Price, the respondent’s appraiser. Since the appellants’ case essentially depended on their view that the comparables were not true comparables, I propose to touch very briefly upon Mr Wiens’ evidence in this regard.

In relation to comparable number 1, Mr Wiens simply said that the price was cheap. This comparable, I should point out, was a sale from a Doris Magarell to Donald and Patricia Manness, made on July 20, 1971. The property was two miles west of the subject property, consisted of 620 acres, and sold for approximately $100 per acre. According to Mr Wiens, the price was cheap and his sole basis for making that statement was that prices were depressed at that time. There was a suggestion that this was a sale by an aunt to a nephew, and that she had recently been widowed. If I recall Mr Wiens’ evidence, that was the extent of his knowledge in relation to that transaction.

With reference to comparables 2, 4 and 6, the vendor in each case was a Mr Ernest Karlowsky. Mr Wiens was personally familiar with all properties, and in fact, Mrs Wiens was the purchaser of comparable number 4, consisting of 150 acres. The purchase price, as I have it, was approximately $113.95 per acre. Comparable number 2 was a 115-acre farm, purchased by David Warkentin for $116 per acre, while comparable number 6 was purchased by Frank Warkentin and consisted of a 121-acre farm acquired by him for approximately $111 per acre.

All these sales were clearly arm’s length transactions and in each case the sale date was December 31, 1972. Mr Wiens suggested that the purchase price was low and he stated that, “Mr Karlowsky lived 20 miles west of the area. He had an opportunity to buy land near his residence and was very eager to sell, therefore had to do so in a hurry to take advantage of the opportunity’’.

Proceeding with the comparables, number 3 related to a purchase made by Mr Wiens himself. In May of 1972, he acquired 214 acres from a neighbour, Mr Carter, for $90 an acre. The special circumstances suggested in this instance were that Mr Carter was a 70-year old bachelor who decided to sell in the spring of the year on the advice of his doctor. According to Mr Wiens, at that time of the year it is hard to find a buyer since it is seeding time, the land has to be prepared, and normally people are not prepared to become involved in the acquisition of land at that time, for that reason.

He referred to comparables number 5 and 8 in the Minister’s appraisal report, which were two sales made by Peter and Anne Enns, who according to Mr Wiens were husband and wife. One hundred and twelve acres were sold on March 1 to Raymond Gauthier for $96 per acre, and 229/2 acres were sold on December 29, 1972, to David Dyck at $110 per acre. I have rounded off many of these acreage prices.

Mrs Enns, one of the vendors, purportedly gave her husband’s bad health as a factor or reason for the sale of their land, and this was coupled with the fact that they lived, (if I understood Mr Wiens correctly), in LaSalle and not on the farm, and she no longer wished to put up with the aggravation or difficulty of getting to the farm.

In relation to comparables 7 and 9, again one vendor was involved. Number 7 related to the sale of 163 acres on July 7 of 1971, at $92 per acre, while number 9 was the sale of 156 acres on February 22, 1972, for $115 per acre. Mr Wiens stated that the vendor’s brother had died, leaving the farm available, I took that to mean the homestead, and the vendor sold his farms to enable him to acquire the home farm and settle the estate.

None of these factors, Mr Wiens implied (and it was argued later) were reflected in the minister’s appraisal report. I think it is only fair to note at this time that no evidence was tendered to support or substantiate any of these alleged special circumstances.

The appellants sought to introduce Mr Wiens’ opinion as to the fair market value, both as to the property in issue, and as to the comparables as well, based on his experience in farming and in farm related businesses for a number of years. What this really amounted to was the introduction of the opinion of a lay-witness, since in the pure sense, I doubt whether Mr Wiens had the qualifications to be considered an expert. In fact, I so find. Such lay opinions are not excluded as a matter of law, but are within the Court’s discretion to admit, and I did so. I did so, however, aware of the fact that the basis for Mr Wiens’ views or opinion would have to be scrutinized very carefully to determine what weight should be attached thereto. His opinion that fair market value as determined by Mr Price was low depended on the alleged facts that the sales of all comparables had been the result of circumstances creating what one might call forced sales. However, without exception, all of the evidence tendered to provide the foundation for that opinion was hearsay pure and simple, and was additionally, if more need be said, rather equivocal and imprecise.

For example, in relation to comparable number 1, Mr Wiens said, “I don’t know the vendor, I believe she is a widow, but in my view, the price was cheap”, and he went on to say that in any event prices were depressed at that time. However, there was nothing in his evidence, nor was there any other evidence to enable one to find that this was a forced sale.

If I may use just one other example. The sales made by Mr Karlowsky, according to Mr Wiens, were made because the vendor was in a hurry to sell, yet we have no evidence as to when Mr Karlowsky had to close on the purchase of the new farm, which was apparently the reason for the hurried sale. We have no evidence of how much time Mr Karlowsky had to dispose of the three farms, which are our comparables 2, 4 and 6. We do not know whether he used agents, or did not use agents, we do not know whether he was satisfied that he received fair market value, or whether he believed that he sold at a sacrifice price. That kind of evidence was essential to support Mr Wiens’ position.

The appellants sought to introduce a one-page letter, or document, dated August 18, 1980. This document purported to be a valuation of the land in question as at December 31, 1971, prepared by a Mr F P Patura, AGR, which designation was accepted by all parties to describe Mr Patura as an agronomist. He had not been subpoenaed to appear, and was apparently not available to testify. I should point out at this stage that a motion was made to adjourn the case because of Mr Patura’s unavailability, but in view of the circumstances, the Court denied that request. There was some suggestion that Mr Patura was a consulting agrologist, but no evidence was adduced as to his experience, qualifications, or accreditation, if such existed, as a person capable of land appraisal.

Counsel for the respondent objected to the introduction of this document as hearsay. It is a general principle that written statements made by persons who are not parties to the action are not admissible to prove the truth of the matter stated. As well, the rule excluding hearsay renders inadmissible, and again I am speaking generally, statements the probative value of which depends either wholly or in part on the credit of an unexamined person. I think this is particularly the case here, where not only would that person be examined, but even the qualifications of the maker of the document would go unchallenged if the document were to be admitted. In my view, the objection was well founded, and the document was not allowed in evidence.

Before leaving the testimony of Mr Wiens I note that he conceded in cross- examination that at the relevant time land was cheap because prices were generally depressed. As well during the period of 1968 to 1973 his farm machinery business was not very good. He said that “depressed” fairly described the grain market at that time, and that this had a corresponding effect on land prices. Lastly, he agreed that land values declined from 1968 onwards, and did not begin to escalate again until 1973.

I should also note that there was no dispute in relation to the fact that the properties referred to as comparables were very similar to the lands at issue in soil type, quality, location, accessibility to roads and to markets, and in their capacity to produce.

No other evidence was adduced by the appellants.

The respondent called as a witness Mr Bramwell Price, who is an experienced and accredited appraiser, who had been employed in that capacity by the Minister of National Revenue for approximately 12 years. The report prepared by him, I stand to be corrected, was while he was still employed by Revenue Canada. Since 1981 when he left that employment he continued appraising on a freelance basis, in addition to his occupation with the Salvation Army. He has appeared, as I understood his evidence, both before and after 1981 as an expert witness in various courts in Manitoba.

In his report he used the market data approach. He inspected the property in issue personally, as well as the comparables used, and he made his own valuation. He used information provided in the data bank maintained by Revenue Canada to identify sales of similar properties. The nine comparable sales utilized represented all sales of farm lands made within a six-mile radius of the subject property within one year of V-Day in each direction from December 31, 1971.

In analyzing the comparables, in addition to considering the selling price, Mr Price considered location, zoning, soil type, cultivated acreage, as well as government assessed values, and Manitoba crop insurance ratings. All of these factors are summarized in the report in chart form at page 20. The similarity between the properties in every respect, is readily apparent from this analysis. His conclusion was that in view of those factors, and except for personal preference in the size of land area reuired, there was little to mark any of the properties as being in any way different from the others. The prices varied from a low of $90 to a high of $116 per acre producing a median of $110 per acre. It was his conclusion that the fair market value of the property as of V-Day was $52,000.

On cross-examination of Mr Price it became apparent that the key issue taken by the appellants was with respect to the alleged failure of Mr Price to consider the impact of the special circumstances suggested by Mr Wiens as affecting each of the sales. Mr Price conceded, that with the exception of comparable number 1, he did not contact the vendors or purchasers to see if there were circumstances in existence which might cause the sale price to be lower than true fair market value. He did speak to the purchaser of comparable number 1, who, according to him, indicated that he believed that full market value was indeed paid. He also agreed in part that his definition of fair market value was in a sense contingent upon the vendor having a reasonable time within which to find a purchaser.

Counsel for the appellants suggested that all of the comparable sales fell into the category of forced or hurried sales, where the vendors for one reason or another took less than fair market value, and that Mr Price’s failure to consider this was fatal to the validity of his fair market value determination. I find that the evidence simply does not support the appellants’ position. In the first place, it was clear that the market was generally depressed, and that this was a truly general state of affairs. This would not detract from the capacity of an expert appraiser to determine fair market value. A depressed market affects everybody concerned, that is all purchasers and all vendors, and it is within the knowledge of all, and by itself, it cannot be considered as a form of compulsion.

Secondly, in my opinion, the comparables do form a valid basis for valuation.

Finally, the appellants’ suggestion that reasonable time was not available to the various vendors is just simply not supported. For example, comparables 7 and 9 show that Mr Dyck sold one property in July of 1971, and the second one in February of 1972. The same applies to comparables 5 and 8 where the sales were made by the same vendors (who were husband and wife) on March 1, 1972, and December 29, 1972, respectively.

I do not propose to review in detail the various factors which lead me to conclude that Mr Price made a thorough and proper analysis of land values in the area. It will suffice to say that I have no hesitation in accepting his testimony. He, in my opinion, was a knowledgeable and creditable evaluator. On the other hand, while I am satisfied that Mr Wiens was a forthright and honest witness, his conclusions as to value were not founded on evidence that I would consider cogent, nor in some instances admissible.

On balance, therefore, I find that the Minister’s evaluation is correct, and accordingly, the appeals must be dismissed.

Appeals dismissed.